Safe and Sound

Liberty Bank

South San Franci, CA
4
Star Rating
Liberty Bank is a South San Franci, CA-based, FDIC-insured bank started in 1982. Regulatory filings show the bank having equity of $35.1 million on assets of $279.4 million, as of December 31, 2017.

With 49 full-time employees in 3 offices in CA, the bank has amassed loans and leases worth $182.7 million, including real estate loans of $168.6 million. U.S. bank customers currently have $243.4 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Liberty Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a buffer against losses and provides protection for depositors when a bank is experiencing economic instability. Therefore, when it comes to measuring an an institution's financial strength, capital is valuable. When it comes to safety and soundness, more capital is better.

Liberty Bank racked up 16 out of a possible 30 points on our test to measure capital adequacy, beating the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Liberty Bank's Tier 1 capital ratio was 12.76 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic headwinds.

Overall, Liberty Bank held equity amounting to 12.56 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a future failure.

Liberty Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.05 percent of Liberty Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Liberty Bank's loan loss allowance was 3,073.63 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Liberty Bank received below-average marks on Bankrate's earnings test, achieving a score of 6 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. The most recent annualized quarterly return on equity for Liberty Bank was 2.06 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $719,000 on total equity of $35.1 million. The bank reported an annualized return on average assets, or ROA, of 0.26 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.